Question

What assumptions are made when using the simplest version of the economic order quantity​ (EOQ) decision​ model?

A. Purchasing cost per unit is unaffected by the quantity ordered.
B. The same quantity is ordered at each reorder point and no stockouts occur.
C. ​Demand, ordering​ costs, carrying​ costs, and the​ purchase-order lead time are certain. Also, costs of quality are considered only to the extent that these costs affect ordering costs or carrying costs.
D. All of the above are correct.
E. None of the above are correct.

Answer 1

The assumptions made in the EOQ model include a constant purchasing cost per unit, consistent reorder quantities without stockouts, and certain demand, costs, and lead times. Option D, which states all of the above as correct, is the accurate choice.

Step-by-step explanation:

The simplest version of the Economic Order Quantity (EOQ) decision model relies on several key assumptions to ensure its accuracy and applicability. These assumptions include:

• A. The purchasing cost per unit remains constant regardless of the order quantity.
• B. The same quantity is ordered at each reorder point, ensuring that no stockouts occur.
• C. Demand, ordering costs, carrying costs, and the purchase-order lead time are certain. Additionally, costs of quality only influence this model to the extent they affect ordering and carrying costs.

Therefore, the correct answer to the question posed is option D: All of the above are correct.